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Monday, May 21, 2012

Full-Cost Accounting vs Successful-Efforts Accounting in the Oil and Gas Industry

An interesting look at two types of accounting in the oil and gas exploration and production industries.
"About half of the public E&P companies use the same full-cost accounting procedures as Chesapeake," spokesman Michael Kehs said. "We believe that puts us in good company."

But larger, more established companies—including Exxon and Chevron Corp., as well as some independent producers such as EOG Resources Inc.—tend to use an approach known as successful efforts. U.S. securities rules permit publicly traded oil and gas companies to choose between the two; six of the 10 biggest U.S. natural-gas producers use successful-efforts accounting.

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